As Postal Service goes broke, commission denies rate increase

A rejection of rate increases by the Postal Service was applauded by consumer groups Thursday as the agency loses billions of dollars every year. Image: aburt/Flickr

A request by the U.S. Postal Service to raise postal rates by 5.6 percent was denied by the Postal Regulatory Commission Thursday. Among the proposed increases, the postal service said raising the price of a first class stamp from 44 cents to 46 cents was necessary because of reduced mail traffic during the recession. The commission rejected that notion and said the postal service’s problems are a result of its business practices.

Postal rate increases a cry for help

The Postal Service, which projects a deficit of $238 billion through 2020, is about to go broke. In addition to the first class stamp price increase, Bloomberg reports that the Postal Service requested an increase of 7 percent on packages used to ship books, videos and merchandise. and 23 percent increase for parcels less than one pound. The rate increases would have been the first in two years. To cut costs,the Postal Service also wants approval from Congress to end Saturday mail delivery.

U.S. Mail is in dire straits

The Postal Service was left out of a temporary spending measure to fund federal programs through early December that passed the Senate on Wednesday and the House Thursday. The Washington Post reports that Republican opposition also kept Congress from letting the Postal Service postpone a $5.5 billion payment required by law to pre-fund retiree health benefits. The Postal Service has managed to cut $10 billion in spending since 2008. Part of its strategy is to trim its workforce via attrition. In a statement the Office of Management and Budget said mail service would not be compromised as the USPS and Congress comes up with a plan to ensure that the agency is viable in the future.

Why the postal rate increase was rejected

The Postal Service lost $3.8 billion in 2009. The Associated Press reports that Ruth Goldway, chairman of the commission, said the proposal was rejected more for the presentation than the details. At a news conference she said the need for a rate increase was not due to the recession, as the proposal said, but was because of long-term structural problems that must be addressed. The commission’s rejection was lauded by the Affordable Mail Alliance, a coalition including consumer groups, small business, charities, utilities, national retailers and banks.